HELOC Payment Calculator

During the draw period — usually ten years — you pay interest only on what you have borrowed, so the balance never falls. When the draw period ends you can no longer borrow, and the balance amortises over the repayment period, typically twenty years. The payment often doubles overnight.

The step from interest-only to fully amortising. On $60,000 at 8.5%, the interest-only payment is $425; amortising over twenty years it becomes roughly $520 — and larger on shorter repayment terms. The date it happens is in your loan documents, so it is entirely predictable.

A HELOC is a revolving line at a variable rate, drawn as needed — good for staged costs like a renovation. A home equity loan is a lump sum at a fixed rate with level payments — better when you know the amount and want certainty. The HELOC's flexibility comes with rate risk.

Only when the proceeds buy, build or substantially improve the home securing the loan, and only if you itemise. Using a HELOC to consolidate credit cards or buy a car does not qualify. Since 2018 that has narrowed the deduction sharply.

Most lenders allow a combined loan-to-value of 80–85%, counting the first mortgage plus the full line. On a $600,000 home with a $300,000 mortgage, 80% leaves about $180,000 of line. Your income and credit then determine how much of that you actually qualify for.

Lenders can freeze or reduce an unused line, and many did during the 2008 downturn. A HELOC held as an emergency backstop can vanish at the moment the emergency arrives — which is an argument for cash reserves rather than available credit.